Knowledge Centre

2021 was certainly an eventful year to say the least. Investors were faced with a barrage of negative headlines throughout the year resulting in increased volatility across global markets.

When investing in capital markets, investors have a wide array of choices. The primary task facing investors is choosing between bonds, stocks, or a mix of both.

Interest rates could be on the rise in Canada next year as the Bank of Canada reverses its long term policy of stimulating the economy to offset the debilitating impact of COVID-19. The general consensus is that sometime during 2022 short term interest rates will be going up.

History never repeats itself in exactly the same way but similarities exist, especially in the timing of economic events or cycles.

The 1990’s saw the launch of equal weighted indices in the U.S. which have outperformed their traditional cousins, the long standing market capitalization weighted (market cap) indices, by 1.5% per year for the S&P 500.

The prevailing line of thinking in the investment world is that rising interest rates will spell doom for Real Estate Income Trusts (REITs). In reality this is completely wrong.

The demand for safe haven assets has surged as inflation fears begin to grow. Inflation is defined as a rise in the general price level so that the real value of money’s purchasing power declines.

Stock investors often hear about the axiom “sell in May and go away” around this time of year. It implies that investors should sell their stocks in early May and buy them back in late October at a lower price.

The global financial markets are intertwined into one gigantic and convoluted web. This is especially evident with the relationship between currencies and bond spreads (which are the difference between various countries’ bond interest rates).

As the global economy struggles to find its way and volatility has once again erupted in the markets, investors can benefit from a little perspective. Investing through this turbulence has been painful.